1. Exploring the World of Business and Economics
Chapter One
Exploring the World of Business and Economics

2. Learning Objectives
Discuss what you must do to be successful in the world of business
Define business and identify potential risks and rewards
Define economics and describe two types of economic systems: capitalism and command economy
Identify the ways to measure economic performance
Examine the different phases in the typical business cycle
Outline the four types of competition
Summarize the factors that affect the business environment and the challenges that American businesses will encounter in the future

3. Tips for Studying Business
Prepare before you go to class
Read the chapter
Underline or highlight important concepts
Take notes
Apply the concepts
Practice critical thinking
Prepare for exams
These study outlines will help

4. Key Terms and Ideas Define Free Enterprise
Know the definition of Business
Understand why studying business is important
What are the four resources that businesses combine in order to be successful?
Know the difference between Manufacturing Businesses and Service Businesses
What are Marketing Intermediaries and why are they important?

5. Satisfying Needs Why do people buy goods and services?
What must businesses understand about customer needs to help them be successful?

6. Sales Revenue and Profit
What is Profit?
How is it calculated?
Know the purposes of profit
Who/What are Stakeholders?
Know the difference between primary and secondary stakeholders

7. Types of Economic Systems
Be able to define and explain
Economics
Microeconomics
Macroeconomics
Economy
Factors of Production
Entrepreneur

8. Differences in Economic Systems
List and define principle characteristics of the major economic systems
How do these systems differ?
What are the four basic economic questions that economic systems seek to address?

9. Capitalism How is Capitalism defined?
What does Adam Smith’s laissez-faire capitalism have to do with modern capitalism?
What are the basic assumptions and principal tenets of Smith’s laissez-faire capitalism?

10. Capitalism (cont’d)
What are distinguishing characteristics of capitalism in the United States?
What role do the following groups play in a U.S.-style capitalist system?
Households
Businesses
Governments

11. Types of Economic Systems
Define Command Economies
What are the two major command economies?
What are their key characteristics?
How do the two command economies differ?

12. Measuring Economic Performance
Define Productivity
What are major economic indicators of productivity?
How are they calculated?
What do they tell us about the economy?

13. Economic Performance: Key Terms
Be able to define and explain the significance of
Gross Domestic Product (GDP)
Inflation
Deflation
Unemployment Rate
Consumer Price Index (CPI)
Producer Price Index (PPI)

14. Evaluating a Nation’s Economic Health
Why is it important to occasionally evaluate a nation’s economic health?
Be able to define the following terms and explain what they tell us about economic health
Balance of Trade
Consumer Confidence Index
Corporate Profits
Inflation Rate
National Income
New Housing Starts
Prime Interest Rate

15. The Business Cycle What is The Business Cycle?
Define Recession and Depression
What are Monetary Policies?
What role does the Federal Reserve play in the United States’ monetary policies?
Be able to define
Fiscal Policy
Federal Deficit
National Debt

16. Types of Competition What is Competition?
Know the different types of competition
Be able to define
Perfect (or Pure) Competition
Supply
Demand
Equilibrium (Market) Price
Where does the equilibrium price occur on the supply and demand curves?
Monopolistic Competition
What can firms do to gain a competitive advantage in a monopolistic competition situation?

17. Types of Competition (cont’d)
Define and identify key characteristics of the following types of competition
Oligopoly
Monopoly
Know the difference between
Natural Monopoly and
Legal (Limited) Monopoly

18. American Business Today
What is a Standard of Living?
How is it measured?
Know the basic stages of business development in the United States
Explain the differences between the four stages of early business development
Barter system
Domestic system
Factory system
Specialization

19. American Business Today (cont’d)
Know the key characteristics of business development in the 1900s
How did industries change?
Major economic events that shaped business development and economic policy.
Changes in the late 20th century and early 21st century that altered standards of living and consumption patterns.
What is e-Business and how has it changed businesses?

20. American Business Today (cont’d)
What are the defining issues and innovations of the 21st century so far?
The role played by technology
Service businesses
Why are many pessimistic about the U.S.’s future economic prosperity?
Be able to discuss the Current Business Environment

21. The Challenges Ahead There are many challenges for business ahead
Be able to discuss some of the challenges outlined in the textbook
Economic stability
Jobs for the unemployed
Regulation of the financial and banking industries
Reducing the national debt while stimulating business growth
Maintaining U.S. competitiveness in a globalized business environment
Preserving the benefits of competition and small business in the American economic system
Preserving natural resources and the natural environment
Changing demographics
Terrorism and extremism